Minority depository institutions: definition, services, locations
- The FDIC and NCUA track and define banks and credit unions as Minority Depository Institutions (MDIs).
- An MDI is owned or run by Black Americans, Native Americans, Hispanic Americans, or Asian Americans.
- An MDI often serves low-income, rural, and underserved communities.
Low-income and underserved groups often have limited banking opportunities to build wealth. Government agencies, such as the Federal Deposit Insurance Corporation and the National Credit Union Administration, have created programs to recognize institutions that serve these communities in an effort to provide greater access to banking products and tools.
One type of financial institution highlighted by the FDIC and NCUA is a Minority Depository Institution (MDI). If you are interested in minority-owned banks and
here’s what you need to know.
What is a Minority Depository Institution?
An MDI is a recognized financial institution under the FDIC’s Minority Depository Institutions Program or the NCUA’s MDI Preservation Program. The FDIC tracks and monitors all federally insured banks that meet MDI requirements, while the NCUA oversees all federally insured credit unions.
Each agency has its own definition of an MDI, but the requirements are similar. The FDIC and NCUA state that banks or credit unions must be primarily owned or operated by Black Americans, Native Americans, Hispanic Americans, or Asian Americans. Financial institutions may also be required to serve these respective groups in their communities.
Why is a minority depository institution important?
Manuel Chinea, chief operating officer of the Hispanic-run Popular Bank, says MDIs tend to share the common goal of meeting the banking needs of underserved communities.
“It’s the feeling that there’s a void in this community,” says Chinea.
In her experience, Chinea says MDIs have especially helped Asian and Hispanic Americans who may not have culturally assimilated into American culture by providing solid bilingual services and breaking down personal finance concepts. .
“A lot of times they come from backgrounds or countries where credit was not a good thing. They didn’t want to owe anything, so they worked and hoarded money to buy things with cash,” Chinea explains. “But the idea of having to operate that way in the United States doesn’t make sense, because the reality is that it can take you 20 years before you can buy a house under that premise.”
According to a 2019 FDIC report, MDIs offer a greater share of their mortgages and small business loans to low-income and underserved groups compared to non-MDIs. MDIs are often located in areas with more of these groups and therefore also fill important banking gaps for unbanked groups.
What financial resources are available in minority depository institutions?
Many MDIs offer special banking products or services that you may not find at other financial institutions. Here is a brief overview of some of the financial resources available:
- Second chance bank accounts: A second chance bank account is offered to people who may have had an involuntary bank account closure or bad banking history. Accounts are a temporary banking tool. Once you have rebuilt your credibility, you can open other banking products.
- Secure bank cards: A secured credit card can be used by people with low credit scores or minimal credit history. Credit card companies will not perform credit checks and the secured credit card limit will depend on the amount you deposit in advance.
- Prepaid debit cards: A prepaid debit card is a card that carries funds that you load onto it. Prepaid debit cards can be used to make purchases or withdraw cash from ATMs. Keep in mind that a prepaid debit card is not normally linked to a bank account.
- Nuances in banking relationships: An MDI can provide bilingual online banking services or respond to cultural affinities that are not taken into account by traditional banks. Many will also reflect the makeup of their community since local banks and credit unions tend to provide local employment opportunities.
- Easier opening requirements: Some MDIs have Bank On certified accounts. To receive certification, bank accounts must meet specific criteria by the nonprofit organization, such as minimum opening requirements and low bank fees.
Where to find minority depository institutions?
MDIs represent a small percentage of insured financial institutions. As of December 2021, the FDIC had 143 banks listed under its Minority Depository Institutions Program. Meanwhile, the NCUA last reported regulating 520 credit unions with the MDI designation in June 2021.
MDIs tend to be concentrated in particular regions, so your options will largely depend on where you live.
Native American-owned banks – which are the smallest MDI group – are primarily located in the state of Oklahoma.
Most Hispanic American banks are in California, Florida, and Texas. Black-owned banks are mostly available in the southern region of the United States.
Asian American banks are the largest MDI group, and you can find many of these institutions in California, Georgia, Illinois, and Pennsylvania.